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Transfer limits are determined according to the net transfer risk, which is defined as total loans granted, lessloans granted in local currency, less guarantees and other collateral obtained to cover transfer risk, and less areduced weighting of specific products. The limits are allocated to the offices, which are themselvesresponsible for the day-to-day monitoring of the loans granted by them and for reporting on this to Group RiskManagement.At Rabobank Group level, the country risk outstanding, including additional capital requirements andprovisions for country risks, is reported every quarter to Rabobank Group’s Balance Sheet and RiskManagement Committee (the “BRMC-RG”) and the Country Limit Committee. The calculation of additionalcapital requirements and provisions for country risk are made in accordance with internal guidelines andconcern countries with a high transfer risk.At 31 December 2008, the net transfer risk before provisions for non-OECD countries was 1.2 per cent. (2007:1.2 per cent.).Interest rate riskAn important risk component for Rabobank Group is interest rate risk. Interest rate risk is the risk, outside thetrading environment, of deviations in interest income and/or the market value of capital as a result of changesin market interest rates. Interest rate risk results mainly from mismatches between the periods for whichinterest rates are fixed for loans and funds entrusted. If interest rates increase, the rate for the liabilities, suchas savings, can be adjusted immediately. This does not apply to the majority of the assets, such as mortgages,which have longer interest rate fixation periods.Funding and liquidity riskLiquidity risk is the risk that not all (re)payment commitments can be met. This could happen if clients orother professional counterparties suddenly withdraw more funding than expected, which cannot be met byRabobank Group’s cash resources or by selling or pledging assets or by borrowing funds from third parties.In addition to having a diversified funding base, maintaining appropriate levels of central bank-eligiblecollateral and limiting net cash outflows, methods of managing and measuring liquidity risk include theCA/CL method (Core Assets/Core Liabilities). This analysis is based on the cash flow schedule of assets andliabilities. A quantification is made of the assets (and unused facilities) and liabilities that will probably still beor come onto the balance sheet after a defined stress scenario has taken place. These remaining assets andliabilities are referred to as Core Assets and Core Liabilities respectively. The CA/CL ratio is the liquidityratio. Given the weightings used, a ratio of below 1.2 is considered adequate. In 2008, this was the case for thescenarios used.Market riskMarket risk relates to changes in the value of the trading portfolio as a result of price movements in themarket. Price changes include prices of interest rates products (interest rate), equities, currencies, certaincommodities and derivatives. The exposure is calculated and consolidated on a daily basis and managed usinga sophisticated system of limits. At a consolidated level, the exposure is expressed by the “Value at Risk”.This measure, based on historic market developments, indicates the maximum loss that Rabobank Group cansuffer subject to a certain confidence level in “normal” market conditions. The level of the Value at Riskreflects market developments and the positions taken by Rabobank Group itself.In order to understand the maximum potential risk, the effect of certain extreme events (event risk) on thevalue of the portfolios is calculated. To this end, both actual and hypothetical scenarios are analysed.Sensitivity analyses are also used.13